Chapter 7: A Framework for Audit EvidenceChapter 7: A Framework for Audit EvidenceStudent: ___________________________________________________________________________1. Audit evidence is also referred to as an audit opinion. True False2. The amount of evidence gathered is not important to an auditor since the quality of the evidence is of primary importance. True False3. Based upon the risk of misstatement, the auditor uses judgment to determine which balances and transactions should be tested in the financial statements. True False4. Assertions are relevant to the audit process because they are the representations of management embodied in the financial statements. True False5. Assertions are not relevant to an audit because they relate to the auditor and financial statements are management's responsibility instead of the auditor's. True False6. Presentation and disclosure assertions state that all transactions and balances are properly presented, and the company has disclosed every financial transaction and arrangement it entered into during the year in the footnotes. True False

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7. Evidence is generally of higher quality if it involves a member of the audit team actually going out to physically observe it than if it was obtained from another source. True False8. A client's original signed purchase order is higher quality evidence than a confirmation returned from the client's bank. True False9. An auditor may test an account balance by testing the transactions that comprise the balance, by directly testing the final account balance, or a combination of both. True False10. Internal documentation is more reliable to the auditor if the internal control surrounding the documentation is considered strong than if it is considered weak. True False11. Documentation that is produced electronically by the client's internal systems is not considered appropriate to the audit process. True False12. Emails and faxes are documents that represent important evidence to the auditor, however, they are sometimes difficult to substantiate as authentic. True False13. Test of transactions, directional testing and substantive analytical procedures are used to provide evidence about management's assertions embedded in the financial statements. True False14. Vouching recorded transactions involves taking a sample from the journal and tracing the items back to the source documents to ensure the transactions occurred. True False

15. Vouching is a process that helps establish that recorded transactions are valid. True False16. One strategy used by auditors in testing assertions is to perform directional testing to find overstatements or understatements. True False17. The direction of testing from recorded amounts toward supporting documentation provides evidence as to existence of assets and revenues.

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